The only possible way around buying a house in the late 20s or early 30s for salaried employees is to apply for home loans. However, many salaried home loan borrowers fall into the trap of misinformation. This initiates financially harmful decisions that burden them for almost a decade or two.
Since they are betting on their salary’s availability during the future, the chances are that salaried applicants get only one shot at devouring on a well-planned home loan – for which an authentic source of information is needed as a home loan applicant. Here’s a quick guide on home loans and their process.
What Is a Home Loan Used For?
This is a no brainer! A home loan or housing loan is simply an instrument that enables a person to borrow money for either:
- Buying a house/plot/flat
- Renovation of an existing house
- Extension and repairs of an existing house
As collateral, the borrower’s desired property is mortgaged with the lender, who holds its rights until the borrower repays the loan within a predetermined tenure. Like every other loan, a housing loan comprises of home loan interest rates that determine a borrower’s complete EMI obligation. The terms and conditions depend on the lender’s policies and the borrower’s home loan eligibility.
Things to Keep in Mind Before Applying for a Home Loan if You Are A Salaried Applicant
Securing a home loan begins with self-assessment. A borrower should ask themselves the following three questions –
- What is the desired loan principal? (principal is usually 75-80% of the property’s value)
- How long should my repayment tenure be? (it’s good advice to pay off the home loan as early as possible)
- What’s the home loan interest rate and EMI that can be paid without cutting back on essential expenses?
These calculations can be done quickly through home loan calculators. For instance, a home loan EMI calculator can be used to compute the EMI obligation optimally and accurately.
After creating a rough estimate of the home loan terms, the borrower should get their CIBIL score assessed. This lets them presume their likelihood of availing a home loan before approaching a bank/NBFC. It also enables the borrower to improve their credit score to assure that the home loan gets processed according to preferred conditions.
Furthermore, different lenders provide housing loans with several modifications. Here are a few things to understand early on—
- Difference between fixed and floating interest rates. Which one to opt for?
- Prepayment and foreclosure procedure of banks, in case the borrower needs to disburse higher amounts in high-income periods.
- Processing fee, prepayment charges and hidden charges (if any).
Additionally, before availing of a home loan, the borrower should check if their dream property is ready and approved. It should be registered in the name of their property seller, and the overall ownership chain should be legit.
Furthermore, a borrower must correctly compile all the documents required by the lender. Doing this increases the chances of availing a home loan easily. Also, collecting document soft copies helps borrowers apply for a home loan online.